ITAT Remands Rs.1.31 Crore Income Tax Addition Over Cryptic, Incoherent and Non-Speaking Assessment Order

The Delhi ITAT set aside an addition of Rs.1.31 crore made against assessee Vikas Jain and remanded the matter back to the Assessing Officer (AO), holding that the assessment was based on a cryptic and non-speaking order passed without adequately examining facts or granting proper opportunity to the assessee.

The assessee, a director in the Sarvottam Group engaged in the real estate business, had filed his return declaring income of Rs.12.70 lakh for AY 2018-19. During scrutiny proceedings, the AO relied on documents allegedly impounded during a survey and concluded that an entry marked as “VJ” represented the assessee. Based on this notation, the AO treated ₹1.31 crore as the assessee’s undisclosed income and added the amount to his taxable income.

Before the AO, the assessee contended that the hard disk from which the document was retrieved belonged to another person, namely a chartered accountant, and argued that the document was merely a “dumb document” incapable of supporting any addition. However, the AO rejected the explanation and concluded that “VJ” referred to Vikas Jain, without conducting any detailed investigation or analysis.

The CIT(A) upheld the addition by invoking the presumption under Section 292C and observing that the impounded document was found from the assessee’s premises. According to the appellate authority, the assessee failed to rebut the presumption that the document and the transactions mentioned therein belonged to him.

On further appeal, the Tribunal found serious deficiencies in the assessment order. It noted that the order did not clearly explain what information was available with the AO, what investigations were conducted, how the material was linked to the assessee, or how the assessee was confronted with the evidence. The Tribunal observed that the assessment order merely referred to show-cause notices and lacked any coherent discussion or factual analysis.

The Bench further noted inconsistencies regarding the survey proceedings themselves, with references appearing to different survey actions and entities. Such ambiguity, coupled with the absence of a reasoned discussion, demonstrated that the assessee had not been provided adequate opportunity of being heard.

Emphasizing that the right to a fair hearing is a fundamental requirement of tax proceedings, the Tribunal held that both the AO and the CIT(A) had failed to properly examine the matter. Relying on the Supreme Court’s decision in Tin Box Company v. CIT (249 ITR 216), it observed that the Assessing Officer is the primary fact-finding authority and must thoroughly examine the evidence before determining taxable income.

Thus, the ITAT set aside the orders of the lower authorities and restored the matter to the AO for fresh adjudication. The AO was directed to conduct a de novo assessment, provide adequate opportunity to the assessee, consider all relevant material, and pass a reasoned speaking order in accordance with law. The appeal was allowed for statistical purposes.

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